Books on Albania
Update No: 130 - (26/03/08)
The festering problem of Kosovo
There is no doubt what the biggest problem facing Albania is, the negotiation of
the Kosovo crisis. Tirana has made it quite clear that it is not interested in a
Greater Albanian union with Kosovo, which declared independence on February 17.
It is for the international community to pick up the pieces there and to finance
the stricken economy. Nevertheless, the crisis could help Albania realise its
Obtaining NATO membership is Tirana's greatest political goal for 2008. Despite
not receiving an invitation to join the Alliance at the previous summit --
mainly due to the country's political problems related to elections and
corruption -- Albania's primary political leaders anticipate they will receive
an invitation at the summit in Bucharest in April.
If Albania becomes a NATO member this year, it will gain increased opportunities
for progress due to the improvement of the country's image, the credibility of
the government and the establishment of a more secure environment for economic
development and foreign investments.
Albania achieved a GDP growth of 6 p.c. in 2007, according to the Institute of
Statistics, which is a public institution that processes statistical data in the
"We achieved this level of growth, despite the fact that we had a serious
energy crisis throughout the year," said Prime Minister Sali Berisha during
a meeting with media representatives in December. He added that "this
figure is also the target for 2008". Meanwhile, inflation has been kept at
3 p.c. as a result of a strong control system.
The government has prepared a very ambitious budget for 2008 -- Albania's
largest in the last 18 years. Almost 822m euros -- 20 p.c. of the budget -- is
planned to be allocated for investment in national and local roads. The
government has asked domestic and foreign construction companies to schedule
three shifts, so work can continue 24 hours a day. The next elections will be
held in 2009, so this year is the government's last opportunity to fulfil the
electoral promises it made three years ago when Berisha's Democratic Party came
to power. Therefore, the government is accelerating the implementation of
development projects -- especially related to infrastructure.
The Albanian public administration, however, is facing many difficulties
regarding the absorption and management of projects and money. Last year, only
80 p.c. of investments were carried out. International organizations, including
the EU, have expressed their concern several times regarding the absorbing
potential of the public administration.
Boost to trade and FDI
Kosovo´s independence is expected to be very important for the development of
Albania. Tirana is certain that an independent Kosovo will bring stability to
the region, and Albania expects to eventually benefit from this stability by
increasing trade between the countries. Kosovo does not require visas from
Albanians and increased communication is anticipated due to the potential growth
of Kosovo's post-independence economy. One of the government's major projects
that will increase traffic between Kosovo and Albania is the Durres-Kukes
Highway. After the government voted last year to approve the project, a
US-Turkish company, Bechtel-Enka, began construction of the road, which will
cost 600m euros and is to be completed by 2009.
Albania -- which only ten years ago was involved in major political and social
turmoil -- has seen an overall increase in Foreign Direct Investments (FDI).
Many large companies have already expressed an interest in or begun
implementation of projects, primarily dealing with the energy sector and
transmission grids. ASG Power, a Swiss-US multi-national company, has been given
approval to begin construction of a power plant and re-gasification terminal in
the area of Seman, 100km from Tirana. The project will receive an investment of
almost 2.5 billion euros and will include a transmission line connecting Albania
with Italy through the Adriatic Sea.
Simultaneously, another large US company launched a study of major oil and gas
reserves in the country in mid-January. Albania has considerable oil and gas
reserves, which may reach 3 billion barrels of oil and 3 billion cubic metres of
natural gas, according to the study carried out by international consultant
Gustavson, which was hired by Manas Petroleum. If the study is accurate, then
Albania will have opportunities for its economic strategy in 2008 and, in the
future, may become an oil and gas exporter. Albania's FDI for 2007 was more than
400m euros and is expected to be much higher this year based on interest
expressed by foreign businesses in industries such as the energy sector and
Berisha declared to the Strategies Planning Commission on January 19th that
"2008 is the year when the fiscal package will be entirely installed, which
will bring about the deepest fiscal revolution in the history of this
country." The new fiscal package includes a 10 p.c. flat tax and the 1euro
initiative, which allows foreign companies to pay 1 euro for public rents and
licenses. Both are designed to attract businesses to Albania, as well as to
stimulate domestic companies to increase production and employment.
Problems still there
However, Albania does face challenges. It suffers from an energy crisis and lack
of diversification of energy resources. Although the government has made
continuous promises to solve this issue within the year, it will be hard pressed
to do so.
Additionally, the country is still poor, with a growing gap between the rich and
the needy. In fact, Albania ranks near countries such as Russia or Third World
countries, which have a very large difference between the rich and poor. The
fight against corruption and 'informality' is a continuous struggle, and this
phenomenon seems to be moving instead of dissipating. Corruption is not only
seen in central administration, but now has also reached the services sector.
Also, although thousands of informal assets are being formalized, problems still
exist in tax and duty collection.